Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The Simple Math Behind Early Retirement

mrmoneymustache.com

Post reply on HN
Print view View original

91–100 of 246 posts

Re: The Simple Math Behind Early Retirement

#91

Post by laumars »

TheCapn wrote: post #65
liber8 wrote: post #52

MMM has a philosophy that is mathematically sound, and might even work for some people. Unfortunately, it's proven to fail for just about everyone (the spend less, save more advice has been around since the industrial revolution, and it isn't working to well: the average American has $16k in credit card debt). The reason it fails is because it ignores basic psychology. The key quote in this article is: >>But simply c…

At the heart of it your quarrel with his program is that people have no willpower to change? I mean, you're very right in that we have a horrible track record but, in your opinion, is the advice sound should someone be able to adjust their lifestyle?

There's also an argument that relaxation and consumerism breeds motivation.

Relaxation: I work better during the week if I've had a relaxed weekend. Working better leads to a greater likelihood of promotion and thus more income. Also I'm more likely to job hunt if I feel confident about myself. That positive psyche comes from positive environment and often that means having relaxation time at home.

Consumerism: The very reason I got my first job was because I wanted to buy a Dreamcast. When I wanted a house, I changed to a better paid job. Then I wanted nicer things for my house and a car, so I asked for a pay rise. Sometimes greed can be a positive force (if channelled appropriately).

Re: The Simple Math Behind Early Retirement

#92

Post by minikites »

>If you save a reasonable percentage of your take-home pay, like 50%, and live on the remaining 50%, you’ll be Ready to Rock (aka “financially independent”) in a reasonable number of years – about 16 according to this chart

In what universe is saving half your paycheck a reasonable percentage?

Re: The Simple Math Behind Early Retirement

#93

Post by bryanlarsen »

praptak wrote: post #5
r4vik wrote: post #2

> Assumptions: > - You can earn 5% investment returns after inflation during your saving years

Covered here: http://www.mrmoneymustache.com/2011/06/06/dude-wheres-my-7-i... Google cache (his server seems not to take HNing well): http://webcache.googleusercontent.com/search?q=cache:UjYtrDk...

He's using US stock market data for his argument. The US stock market over the last 100 years has been an obvious outlier. In that time the US grew from a small fraction of the world economy to dominating it.

If you want to make this argument, you have to use global stock market data.

Personally, I use 2% after inflation for my calculations, and consider that to be optimistic. There are lots of examples of stock markets returning less than inflation over long term periods.

Re: The Simple Math Behind Early Retirement

#94

Post by martinced »

pragmatic wrote: post #59
r4vik wrote: post #2

> Assumptions: > - You can earn 5% investment returns after inflation during your saving years

Yes, this is quite the assumption. While the US Gov't is doubling down on Keynesian spending (borrowing money, printing it, keeping interest rates near 0), there is no safe/guaranteed investment (CD) that comes close to 5%. I've hedged myself by investing in "foreign" equities. But this is no where near a steady guaranteed 5%. It's super volatile. Life is a risk. You pay your money and you take your chances.

Exactly. I was going to post exactly that, but your post resonates with me...

And of course your nickname is "pragmatic".

: )

Re: The Simple Math Behind Early Retirement

#96

Post by hippich »

laumars wrote: post #70
liber8 wrote: post #52

MMM has a philosophy that is mathematically sound, and might even work for some people. Unfortunately, it's proven to fail for just about everyone (the spend less, save more advice has been around since the industrial revolution, and it isn't working to well: the average American has $16k in credit card debt). The reason it fails is because it ignores basic psychology. The key quote in this article is: >>But simply c…

Not to mention that if everyone stopped spending money tomorrow, then the economy would crash, millions of people would lose their job - meaning both personal savings and government resources are crippled. Which means the chances of you having enough money and a state pension you can live off by retirement age is significantly reduced. While I'm not trying to argue that saving is a bad thing (clearly it's important t…

It comes to a balance. Yeah, if you spend - you help economy. But if we all end up in dept - it will crash economy too. So savings should be reasonable. That's what in theory government should regulate.

Re: The Simple Math Behind Early Retirement

#97

Post by brazzy »

jasonkester wrote: post #67
brazzy wrote: post #45

Earlier quoted context omitted.

Unless it gets taken care of by the increasingly significant fraction of the population who has their lives extended for a few more years at any cost.

Ah, never mind then. So I guess the plan is to stop saving money now, since you've shown that compound interest is a fallacy? I'll get right on it.

No, the plan is to save money but not make too much assumptions on how far it will get you, and most importantly not make any decisions that make you completely dependant on your investment returns.

Re: The Simple Math Behind Early Retirement

#98

Post by cimorene12 »

Swizec wrote: post #83
liber8 wrote: post #52

MMM has a philosophy that is mathematically sound, and might even work for some people. Unfortunately, it's proven to fail for just about everyone (the spend less, save more advice has been around since the industrial revolution, and it isn't working to well: the average American has $16k in credit card debt). The reason it fails is because it ignores basic psychology. The key quote in this article is: >>But simply c…

Ramit Sethi's advice on this really rang true with me "Stop saving on lattes, that doesn't matter, negotiate a $5k+ per year pay increase instead"

I read stuff from both of them and they both have good stuff. MMM says that your marginal utility from a salary somewhere above $100,000 is ridiculous and Ramit disagrees. MMM actually did a case study post on how saving was more effective than salary increases: http://www.mrmoneymustache.com/2012/11/14/doubling-your-sala...

Re: The Simple Math Behind Early Retirement

#99

Post by cimorene12 »

kaybe wrote: post #18
brazzy wrote: post #6

> As soon as you start saving and investing your money, it starts earning money all by itself. No, it doesn't. Money cannot earn money, people do. Saving/investing money only allows people (via an arbitrarily complex system of indirections) to become indebted to you so they'll pay you some of the money they earn. This is vitally important because it means it's impossible for a significant percentage of people to reti…

The blog adresses this issue somewhere (it's been a while since I read it) and argues that the topic is so niche that it won't be applied by a significant percentage of people. Whether that's true or not is another issue of course. edit: An earlier (and I think better) blog on this is http://earlyretirementextreme.com/ , which is now discontinued. (The author recommended reading Mr. Money Mustache instead.)

It's not discontinued. Jacob started up again, so if anybody wants to switch back to ERE, go for it.

Re: The Simple Math Behind Early Retirement

#100

Post by Irregardless »

liber8 wrote: post #52

MMM has a philosophy that is mathematically sound, and might even work for some people. Unfortunately, it's proven to fail for just about everyone (the spend less, save more advice has been around since the industrial revolution, and it isn't working to well: the average American has $16k in credit card debt). The reason it fails is because it ignores basic psychology. The key quote in this article is: >>But simply c…

Reminds me of a great article I saw posted on HN a few months ago. I wish I could remember where it was, but it basically said "You'll never get anywhere by skipping coffee and bringing lunch to work, focus on the big gains like increasing your salary by 30% instead".

The frugal lifestyle BS most likely does more harm than good for the average person. People shouldn't be sacrificing quality of life because they're worried about nickels and dimes, especially not in retirement.

Post reply on HN